Global stock markets and Wall Street indices experienced gains on Wednesday following a November inflation report that met expectations, reinforcing predictions of a Federal Reserve interest rate reduction later this month. The U.S. dollar reached a two-week high, while gold prices also saw an increase. Oil prices surged over $1 per barrel after the European Union approved further sanctions targeting Russian oil.
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European shares rebounded from earlier dips to close higher. U.S. Treasury yields climbed as the Treasury Department conducted a sale of long-dated bonds, coupled with data revealing a widening U.S. budget deficit. The Dow Jones Industrial Average dipped 0.22% to 44,148.56, while the S&P 500 rose 0.82% to 6,084.19, and the Nasdaq Composite climbed 1.77% to 20,034.89. The MSCI All-Country World Index gained 0.58% to 871.45.
CPI Report Fuels Rate Cut Anticipation
A Labor Department report indicated a 0.3% month-over-month increase in the Consumer Price Index (CPI) for November, aligning with the consensus forecast from economists polled by Reuters. The annual CPI stood at 2.7%, also in line with expectations. This reading bolstered confidence in the Fed’s projected course of action. “With everything precisely matching estimates… it’s highly probable the Fed will proceed with their plan, implementing a 25 basis point cut (this month),” commented David Miller, chief investment officer at Catalyst Funds.
Currency and Commodity Markets React
The European STOXX 600 index advanced 0.28%. The yield on benchmark 10-year U.S. Treasury notes increased 5.2 basis points to 4.273%. The U.S. dollar index, tracking the greenback against a basket of major currencies, strengthened 0.31% to 106.68, while the euro depreciated 0.31% to $1.0493. MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.46% to 586.09. The Chinese yuan weakened, and other Asian currencies lost ground against the dollar following a Reuters report suggesting China might tolerate a weaker currency in the coming year to mitigate the impact of potential tariff increases.
Central Bank Actions and Commodity Fluctuations
The Canadian dollar appreciated against the U.S. dollar and other G10 currencies after the Bank of Canada enacted a widely anticipated 50 basis point interest rate cut but signaled a more hawkish stance on future easing. Markets have fully priced in a European Central Bank rate cut on Thursday, with a 61% probability assigned to a 50 basis point reduction by the Swiss National Bank, a move aimed at curbing the recent surge in the Swiss franc.
Spot gold prices increased 0.87% to $2,717.14 per ounce, while U.S. gold futures settled 1.4% higher at $2,756.70. Arabica coffee prices retreated from a record high amidst concerns that drought conditions could negatively impact production in Brazil, the world’s leading coffee producer. Brent crude futures gained 1.84% to settle at $73.52 per barrel, and U.S. West Texas Intermediate crude futures rose 2.48% to $70.29 per barrel.
Conclusion: Markets Respond to Inflation Data and Central Bank Signals
The November CPI report, aligning with expectations, has reinforced market anticipation of a Federal Reserve rate cut later this month, contributing to gains in global equities and Wall Street indices. Currency markets reacted to news from China and the Bank of Canada, while commodity markets saw fluctuations in oil and gold prices, influenced by geopolitical developments and supply concerns. These market movements reflect ongoing sensitivity to economic data releases and central bank policy signals.
